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Red Lobster Could Get Pinched Pen-Raising Its Own Lobsters

When your name is Red Lobster, securing a steady supply of your namesake product is important. When you have nearly 700 cavernous restaurants, and a Gulf of Mexico oil spill putting a crimp in your supply chain, it's certainly not an easy task. But Red Lobster is taking a real gamble with its bid for a solution --a recent move to invest in research into creating its own, vast lobster farms.

Here are three problems with this idea:

  1. Farmed fish controversy. Fish farming is a controversial practice that opponents say pollutes waterways and can lead to declines in wild fish stocks. That controversy will without doubt land on Red Lobster's doorstep if it gets into farming lobster. In some quarters, farmed fish is seen variously as an environmental hazard, unhealthy, and even as a "fake" product, as in the lawsuit where several consumers sued Albertsons, Safeway (SWY) and Kroger (KR) for deception and misrepresentation because their farmed salmon had added color to make it look as pink as wild salmon. If Red Lobster starts serving quantities of farmed lobster, it could face similar litigation over passing off their farmed lobster as "the real thing."
  2. Lobster farming is new. There's a reason Red Lobster has to fund research in Brunei into how to lobster farm -- it's because lobster farming has yet to be done successfully on any sizable scale. That's because lobsters tend to attack each other in close quarters, need to eat vast quantities, and are susceptible to all dropping dead of a highly contagious disease. So trying to pull off lobster farming may well turn out to be a costly money sinkhole that never produces a steady lobster supply for Red Lobster.
  3. Departure from core competency. Red Lobster is not in the food-raising or growing business. It's in the food-serving business. Getting into food production is a major departure for Red Lobster, for which its executives are not experienced or trained. These forays usually end badly. There's a lot of new expertise Red Lobster would need to develop to make this a success.
As one of the flagship brands of Darden Restaurants (DRI), one of the biggest restaurant chains in the country, Red Lobster's reputation matters not just to that chain but to Olive Garden and other Darden brands. Stepping into a controversial industry to grow seafood that's yet to be widely farm-raised exposes Darden to reputation risk and financial risk as well. Better to fund research that an experienced farmed-fish company could use to provide Red Lobster with product and stay out of the food-growing business.

Photo via Flickr user scaredy_kat